Is WisdomTree U.S. MidCap ETF (EZM) a Strong ETF Right Now?

The WisdomTree U.S. MidCap ETF EZM made its debut on 02/23/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Wisdomtree, and has been able to amass over $807.70 million, which makes it one of the average sized ETFs in the Style Box - Mid Cap Value. Before fees and expenses, EZM seeks to match the performance of the WisdomTree U.S. MidCap Earnings Index.

The WisdomTree U.S. MidCap Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the mid-capitalization segment of the U.S. Stock Market.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.

EZM's 12-month trailing dividend yield is 1.51%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 20.10% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, American Airlines Group Inc AAL accounts for about 0.88% of the fund's total assets, followed by Toll Brothers Inc TOL and United States Steel Corp X.

EZM's top 10 holdings account for about 6.98% of its total assets under management.

Performance and Risk

The ETF has added roughly 3.48% so far this year and was up about 26.10% in the last one year (as of 03/25/2024). In the past 52-week period, it has traded between $47.01 and $60.29.

The ETF has a beta of 1.22 and standard deviation of 21.31% for the trailing three-year period, making it a medium risk choice in the space. With about 552 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell Mid-Cap ETF Value IWS tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF VOE tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $13.76 billion in assets, Vanguard Mid-Cap Value ETF has $16.36 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Value.

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